UPDATE 1-Governments fail to agree EU limit on food-based biofuels

Reuters Staff

4 Min Read

* Final agreement unlikely before 2015

* OPEC, Russia the only winners from delay - Oettinger

* Member states divided for different reasons

By Barbara Lewis

BRUSSELS, Dec 12 (Reuters) - EU energy ministers on Thursday failed to agree on a compromise deal to limit the use of transport fuels made from food crops, which critics say pushes up food prices and can do more harm than good to the environment.

The European Union's Energy Commissioner Guenther Oettinger said the delay would damage its efforts to reduce dependence on gas and oil imported from such sources as the Organization of the Petroleum Exporting Countries and would hurt its drive to curb greenhouse gas emissions.

"If we delay and postpone, the winners will be OPEC and Russia," he said.

Last year, in response to warnings about food price inflation and unintended consequences on the environment, the European Commission, the EU's executive, proposed to cap the bloc's use of biofuels based on crops such as maize or rapeseeed at 5 percent.

That compares with an existing goal to get 10 percent of transport fuel from renewable sources by 2020, an amount that would be almost entirely derived from food-based fuels.

Lawmakers in the European Parliament backed a slightly higher cap than the Commission proposed of 6 percent, stirring opposition from the biofuels industry.

The industry has invested on the basis of the original 10 percent goal and accuses the Commission of a U-turn that it says will force plant closures and cost jobs.

EU energy ministers debated a new compromise of 7 percent put forward by Lithuania, holder of the EU presidency.

Member states were deeply divided. Some, such as Poland and Hungary, argued a 7 percent cap was too low, while Denmark and Belgium, for instance, said it was too high.

Others said a compromise deal should be accepted on pragmatic grounds.

"There are some good victories for the environment compared to the current directive," said Ed Davey, Britain's energy and climate change secretary.

Danish Minister for Climate, Energy and Buildings Martin Lidegaard wanted more. He called for a sub-target to spur new generation biofuels made from algae and waste, a cap of 5 percent on crop-based fuels in line with the Commission proposal, and accounting of factors such as indirect land use change (ILUC) as soon as there was "a solid, scientific basis".

ILUC refers to the displacement effect biofuels can cause as land is cleared for extra food crops to produce them, sometimes negating the aim of curbing emissions because it destroys trees and peatland that serve as carbon sinks.

SLOW PROGRESS

Representatives of Germany's biodiesel industry - Europe's largest - welcomed the deadlock, saying it allowed more time to find a more effective approach.

"The compromise did not contain suitable rules which would stop tropical rain forests being cut down," said Elmar Baumann, CEO of German biofuels industry association VDB.

"But it would have heavily damaged Europe's biofuels industry and its farming."

Anti-biofuel campaigners were also relieved the compromise was not adopted, but said the status quo was worse.

"The EU needs to move fast and start listening to the consensus, which is that using food for fuel is an outdated and bizarre policy that needs to stop now," said Laura Sullivan of anti-poverty group ActionAid.

Greece, which takes over the EU presidency in January, will take up the biofuels dossier. However, the changeover of EU institutions next year, with parliamentary elections in May and the expiry of the current Commission in October, means a final deal is unlikely before 2015.

While energy and biofuel firms oppose a lower limit on first generation biofuel, food companies are strong supporters.

"The proposed 5 percent cap by the European Commission would have been a significant step towards phasing out the use of food for fuel," said a letter, seen by Reuters, to the 28 EU energy ministers from Paul Polman, chief executive officer of Unilever plc, and Peter Brabeck-Letmathe, chairman of the board at Nestle S.A..